Is an “insured” not an “insured” excluded by a policy clause that excludes coverage for a claim of one insured against another insured? As oxymoronic as this question may sound, such are the type of contractual interpretation inquiries that frequently occur when it comes to insurance coverage and exclusion issues. In Gemini Insurance Co. v. Delos Insurance Co., B239533 (filed December 5, 2012), the Court of Appeal, Second Appellate District, Division Five, determined in its published opinion that the interinsured exclusion did not bar coverage for a landlord’s claim against its tenant.
The tenant restaurant’s insurance policy included an additional insured endorsement which made the restaurant’s landlord an additional insured for coverage of potential vicarious liability for the tenant’s conduct. Tenant’s negligence caused a fire that damaged the landlord’s property, and landlord sought recovery of its damages from the tenant. Landlord made a claim on its own property insurance. That insurance (through instant plaintiff Gemini) paid the claim. Gemini then sued the tenant in this subrogation action to recover what it had paid. Tenant thought it was covered by its Delos policy. Delos denied coverage relying on the interinsured exclusion clause. The trial court found that the landlord was never an “insured” under the Delos policy, and Gemini was awarded judgment against Delos. The Court of Appeal affirmed.
The appellate court pointed to the express provisions of the Delos policy. Delos was correct that the “Additional Insured” endorsement included the landlord. Under the policy’s “Who is an Insured” section, had the landlord been sued for its vicarious liability arising out of the tenant’s acts in operating the leased premises, landlord would be an insured for this purpose. Here, no one sought to hold the landlord liable for the fire. Accordingly, the interinsured exclusion did not apply.
I am afraid that this opinion is another example demonstrating that, in spite of the insurance industry’s efforts to word policies in “plain English,” insurance companies still have a long way to go in their effort to do so.